Dubai: Unemployment across the oil exporting countries in the region including the GCC is expected surge as governments are poised to cut spending to cope with rising fiscal deficits, according to the IMF’s regional economic outlook.
In the GCC, excluding the UAE, more than 2 million nationals are expected to join the workforce by 2020. If private sector job growth were to follow past trends, and public sector employment growth is consistent with the current fiscal projections, more than half a million job market entrants will end up being unemployed, in addition to the 1 million who are already out of work.
“The aggregate GCC unemployment rate would increase from 12 per cent to 16 per cent. Clearly, if more fiscal adjustment were to take place, with some of it in the form of reined-in public sector hiring, unemployment rates would be even higher,” said Masoud Ahmad, the IMF’s regional director for Middle East and Central Asia.
In the non-GCC region, about 8 million people will enter the labour force over the next five years. Under current growth projections, and using historical growth — employment elasticities, the average unemployment rate would increase from 14 per cent to 15.5 per cent. In practice, the increase could be much higher, because cash-strapped governments will not be able to maintain the pace of public sector hiring.
Limited direct employment
Clearly, the private sector will have to take over from the public sector as the main source of job creation. However, the expansion of the private sector and the diversification away from oil that are needed to absorb the growing workforce have so far proven elusive. Though some progress has been made, most economies in the region are still deeply dependent on the capital-intensive hydrocarbon sector, which generates limited direct employment.
Additionally, the private sector itself is highly reliant on government spending and needs to become self-sustaining through increased competitiveness in other markets including exports. Creating incentives for nationals to move to the private nonhydrocarbon sector, improving skills, and making those skills more relevant to the private sector by improving the quality of education are crucial in this respect.
